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Understanding Credit

How does Credit Score Impact Your Mortgage?

There have always been 4 main pillars to mortgage lending:
1. The Property
2. Income
3. Down Payment / Equity
4. Credit

Credit has always been the one area that stresses people out because….they don’t always understand it, they have no control over how it is reported and because it impacts the type of mortgage and mortgage rate you can have. People control the property they buy, how much they have saved to put down towards the home and obviously how much they make, but credit, is always a mystery and the one component that clients worry about because until your credit is pulled you really don’t know what your “credit score” will be and what mortgage you qualify for.

The GOOD NEWS, there is a way to learn what your credit score is and a trusted mortgage advisor can show you how to make it better, here is how!
The most important thing is to check your own credit, that’s right, you can do it yourself. You can go to www.equifax.ca and get a detailed summary of your financial information and credit history along with commentary and a beacon score if you wish (your beacon score is the industry term to refer to your credit score). It should not cost you anything to get your credit report if it’s sent by mail or picked up in person; they may charge you if you want it sent to you via email.

IMPORTANT FACT – If you inquire about your credit directly through Equifax it will NOT COUNT TOWARDS YOUR CREDIT SCORE, i.e., your credit score (or beacon) won’t go down at all. If you ask a financing institution or go broker to broker and they all pull your credit score (assuming you have given them authorization to do so) each time your credit score is pulled it goes down. This could be particularly problematic as this could impact your interest rate. Most people, don’t realize that every time you give someone consent to pull your credit, your score actually goes down.

Aside from periodically checking your credit through Equifax, there are other things you can do to help ensure your credit remains strong:

1. PAY BILLS ON TIME Always pay “minimum payments” on time if you can’t pay the whole amount off
2. DO NOT exceed credit limits Exceeding or being close to limits will bring your score down
3. DO NOT apply for a lot of credit at once Spread out requests for a car lease, mortgage, lines of credit, etc.
4. DO NOT apply for “store credit” from retailers Even if it saves you money upfront on a purchase it will drag down your score. Store credit is viewed negatively by the credit bureau companies (i.e., Equifax, TransUnion) and their interest rates are in the high teens
5. DO NOT close credit cards you are not using It is ok to have zero balances and even better if you use them periodically (even just small amounts)

Don’t let your credit score stress you out. Call us today to learn how it works and how you can improve it so that you can get the right mortgage for you.


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The closing went well today. And we just want to say thank you so much from the bottom of our hearts for all your help and also thank you for being so patient with us. Thanks once again, Joice and Philip – Toronto, ON
Joice and Philip
 

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